Gold prices end lower on rise in U.S. bond yields, risk-on sentiment

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Gold prices end lower on rise in U.S. bond yields, risk-on sentiment

Gold futures finished with a modest loss on Thursday, as the recent rise in U.S. bond yields and a firmer dollar, as well as strength in the stock market created some headwinds for bullion buying.

Hopes for President-elect Joe Biden’s coronavirus relief plan fueled a “risk-on attitude,” said David Madden, market analyst at CMC Markets UK.

U.S. benchmark stock indexes traded higher Thursday as gold futures settled, with the Dow Jones Industrial Average DJIA touching an intraday record, drawing some haven interest away from gold.

Gold futures had settled at $1.835.40 on Friday, the lowest since since early December. Should prices “fall below the recent low, it could pave the way for $1,800 to be tested,” said Madden, in a market update.

On Thursday, February gold prices GC00, -1.25%   GCG21, -1.25%  fell $3.50, or 0.2%, to settle at $1,851.40 an ounce, after a 0.6% rise on Wednesday.

Silver for March delivery SI00, -3.75% SIH21, -3.75%,  meanwhile, added 23 cents, or 0.9%, at $25.802 an ounce.

Gold “remains trapped in a trading range without breaking out in either direction for now,” wrote Peter Cardillo, chief market strategist at Spartan Capital Securities.

The longer-term outlook for the yellow metal among some dealers is for higher prices, amid expectations for further U.S. government relief to boost the economic recovery from the coronavirus pandemic.

President-elect Joe Biden later Thursday is expected to outline a $2 trillion fiscal spending package that would include more direct payments to American families and significant state and local funding.

Meanwhile, in a speech Thursday, Federal Reserve Chairman Jerome Powell said inflation may rise as the economy recovers from the pandemic but is unlikely to be persistent and the central bank had no plans to change monetary policy anytime soon.

Gold prices in the longer-term could rise as governments around the world use both fiscal and monetary policy to reflate their economies, analysts believe.

However, buoyant U.S. Treasury yields, which compete against gold for haven demand, and a perkier dollar, measured by the ICE U.S. Dollar Index DXY, 0.59% are weighing on gold prices, analysts say.

The 10-year Treasury yield was around 1.12% on Thursday and had approached 1.19% earlier in the week. Gold and other precious metals don’t offer a coupon.

Separately, the U.S. dollar was down less than 0.1% at around 90.29, but looks to end the week higher. A stronger dollar can make assets priced in the currency more expensive to traders overseas.

“Investors remain unsure about the prospects in gold,” as exchange-traded funds saw a reduction in gold holdings Wednesday of 311,944 ounces, which was the biggest one-day outflow since November 30th, analysts at Zaner Metals wrote in a daily report.

“Some traders think gold is in line for steady flight to quality buying interest in the coming week off the prospect of a 2nd wave of violence in Washington around the inauguration,” the analysts said. However, “we would not rule out some deterioration in gold and silver prices in the coming 5 sessions with the U.S. aggressively beefing up security around the Capitol with National Guard troops.”

Gold futures initially fell toward the session’s lows before paring those losses in the wake of the latest data on jobless claims. U.S. weekly initial jobless claims rose by 181,000 to a seasonally adjusted 965,000 in the seven days ended Jan. 9, the government said Thursday.

The rise in the reading for unemployment insurance to the highest level since August may support arguments for additional fiscal stimulus, which could influence gold trade.

Among other metals traded on Comex Thursday, March copper HGH21, -1.58% added 1.3% to $3.6645 a pound.